Pennsylvania’s Department of Environmental Protection yesterday fined natural gas company Chesapeake Energy almost $1.1 million for violations that led to the injuring of three workers and the contamination of 16 families’ drinking water.

Under a Consent Order and Agreement, or COA, Chesapeake will pay the DEP $900,000 for contaminating private water supplies in Bradford County, Penn., of which $200,000 must be dedicated to the department’s well-plugging fund. This is the largest single penalty the DEP has ever assessed against an oil and gas operator.

Under a second COA, Chesapeake will pay $188,000 for a Feb. 23 tank fire at its drilling site in Avella, Penn. The fire injured three subcontractors working on site.

At various times throughout 2010, The Pennsylvania DEP investigated private water well complaints from residents of Bradford County’s Tuscarora, Terry, Monroe, Towanda and Wilmot townships near Chesapeake’s shale drilling operations.

The DEP determined that because of improper well casing and cementing in shallow zones, natural gas from non-shale shallow gas formations had experienced localized migration into groundwater and contaminated 16 families’ drinking water supplies.

As part of the Bradford County COA, Chesapeake agrees to take multiple measures to prevent future shallow formation gas migration, including creating a plan to be approved by the DEP that outlines corrective actions for the wells in question; remediating the contaminated water supplies; installing necessary equipment; and reporting water supply complaints to the DEP.

The well-plugging fund supports the DEP’s oil and gas program operations and can be used to mitigate historic and recent gas migration problems in cases where the source of the gas cannot be identified.

Under the COA, Chesapeake must submit for approval to the department a condensate management plan for each well site that may produce condensate.

The Avella action was taken because on Feb. 23, while testing and collecting fluid from wells on a drill site in Avella, Washington County, three condensate separator tanks caught fire. The Pennsylvania DEP conducted an investigation and determined the cause was improper handling and management of condensate, a wet gas only found in certain geologic areas.

“It is important to me and to this administration that natural gas drillers are stewards of the environment, take very seriously their responsibilities to comply with our regulations, and that their actions do not risk public health and safety or the environment,” said Pennsylvania DEP Secretary Mike Krancer.

Local news service Pennlive.com reports thatChesapeake Energy has issued a statement saying the company had started working with the DEP “the moment we learned a potential problem existed.” The company is, the statement continues, “taking prompt steps to enhance our casing and cementing practices and procedures.”

The blowout happened at Chesapeake’s facility in Leroy Township, Penn., while the company was extracting underground gas deposits using the process known as hydraulic fracturing, or “fracking”.

The Commonwealth of Pennsylvania is the lead government body in the case, but the EPA has requested information regarding the hydraulic fracturing fluids used in the drilling process at the well; the water, land and air affected by the release; and any private well, surface water and soil sampling data collected in the area before and after the mishap.